The inherent problem is that while DSO returns per ton of mined ore are less than Spod, they can be brought on-stream much faster. For a period of time across 2024, 2025 and possibly some of 2023, the choice may be strong DSO revenues or nothing. If DSO revenues are potentially $500+/t they are massively higher than other commodities like coal and iron ore that are DSO shipped from Australia. The gross margins would be one's that many other miners would love to have as their main business. I think, but Core's auction will help confirm this that current DSO ore pricing is higher on a lithia adjusted basis than many miners are using in their Spod based business cases (its just less than the super-high current spod prices)
The current plan is a Concentrator circuit that involves both Flotation and DMS. This would appear to be more complex than Core's system and is therefore likely to take longer. Core gave Primero the deal on 28 Sep 2021 and while it is progressing well, the DMS plant build id yet to be completed, yet alone commissioned to nameplate. ESS is likely to have this same issue that while it can dig ore out of the ground quickly, it will take perhaps 2+ years before a concentrator plant is built and functioning at nameplate. That 2-yr clock only starts ticking with a FID decision on a concentrator. What to do during this 2-year concentrator build period?
A) DSO ship some ore and gain a really good price (but lower than if you could have magically processed the ore to Spod)? B) Don't mine anything until the concentrator plant is complete and hope that the future spod prices 2+ years are higher than a really good DSO price now?
If you did do DSO and ESS had positive operational cash flow, could some of that not be spent on turbo-charging exploration meaning that by the time the concentrator is complete, reserves may well be back at the same level, if not higher than they would have been without DSO shipping?
ESS Price at posting:
44.5¢ Sentiment: Buy Disclosure: Held
